(Gross Profit Method) Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
|
Inventory, May 1 |
$ 160,000 |
|
Purchases (gross) |
640,000 |
|
Freight in |
30,000 |
|
Sales |
1,000,000 |
|
Sales returns |
70,000 |
|
Purchase discounts |
12,000 |
Instructions
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.